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What is Financial Reporting?

October 14, 2021
Reporting
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Financial reporting is a critical task for any organization. Understanding where your actual financials stand in relation to budgets and projections is important to keeping your business on track and in helping to create new projections and budgets.For most organizations there are four key financial statements that present a complete picture of the financial condition and results of a business:Balance sheet: Lays out the ending balances in a company's asset, liability, and equity accounts at a point in time, providing a picture of what a business owns and owes, as well as how much has been invested in it.Income statement: Presents the financial results of a business for a stated period of time - reporting on a company’s expenses, revenue, and net loss or income.Cash flow statement: Describes the cash flows into and out of the organization - its particular focus is on the types of activities that create and use cash, which are operations, investments, and financing.Shareholder’s equity statement: Details the changes within the equity section of the balance sheet over a designated period of time, providing additional information on equity-related activity during a reporting period. Ensuring that each of these reports contain accurate and timely data is critical for finance teams in order to support decision making - and it takes the right tools to get you there.

Issues with Using Excel for Financial Reporting

When it comes to using Excel for financial reporting - especially where these key reports are concerned - issues with errors are both well-known and widespread. While reviews and workflows have improved somewhat over time, it is estimated that 88% of existing spreadsheets contain errors.When using spreadsheets for financial reporting, these errors are amplified. Obviously, incorrect entries and miscalculations result in inaccurate reports. But moreover, the frequency of errors erodes trust in the reports themselves. The solution? Multiple rounds of audits and reviews to help ensure accuracy.But manual entry and mistakes in formulas aren’t the only areas where Excel causes reporting problems. The reports themselves must be created manually, and then recreated manually, every week, month and year.Plus, Excel reports are created off static data, meaning that they do not dynamically update in real-time as changes occur, so financial reports are out-of-date before they are even complete and analysis is done on old data.In the end, Excel was never built as a tool to create reports meant to influence how companies plan their financials. When it comes to financial reporting, Excel just doesn’t hold up.

Financial Reporting: The Importance of Automation

The days of manual data entry from one spreadsheet to another should be a task of the past. Finance teams are critical contributors to a business's strategy and don't have the time for manual task, not to mention, that manual work results in a lot of review and quality assurance to avoid errors.However, when an organization begins to evaluate financial reporting automation, it can be a daunting task. CFOs and their teams want to get the most value out of the first tasks and reports that they automate.Process mapping and planning and the automated workflows of a financial report takes time. Where should the team start? Certain reports have a cascading effect, resulting in additional wins when it comes to automated financial reporting. Starting with other, lower level processes can provide a foundation for other key reports.The Key Reports to Automate and WhyWhen it comes to financials, as mentioned above, there are four reports that stand above the rest: the balance sheet, the income statement, the cash flow statement, and shareholder’s equity statement. Each of these has its own purpose and timing. But automating the balance sheet can yield big returns for the company and for the finance team.The balance sheet represents a company’s assets, liabilities and shareholder’s equity at a moment in time. However, automating the balance sheet’s creation can mean that moment in time is almost any time. If the data that feeds the balance sheet is provided through integrations with the primary systems that hold that information, this report can represent a moment in time that is meaningful for other reports as well.By automating data, for instance, within the assets section of the balance sheet, your cash flow report is largely automated as well. So is your shareholder’s equity statement. It becomes trivial to automate some of the other core reports once the balance sheet’s automation has been mapped and implemented.Automating Routine Tasks Can Be ImpactfulBy automating some of the more routine tasks and reports you will have an accurate underpinning for those key reports to pull from.For example, automation of expense reports can simplify the process for the finance team and provide the foundation for the income statement. By automating indirect and direct expenses, the income statement gains accuracy and removes the manual process of copying the data from spreadsheet to spreadsheet.The key for all of this, of course, is to use tools that allow for automation of these statements while also supporting integration with the core systems of record from where the data can be provided. FP&A software that facilitates integration and generation of key reports will make automating these statements easier and allow the finance team to concentrate on mapping the processes and setting up the automation.One such software is Centage’s Planning Maestro, recently named a Best Financial Reporting Software of 2021 by Digital.com, a leading independent review website for small business online tools, products, and services. Planning Maestro was ranked among top solutions for financial reporting features, integrations, and reports along with customer feedback. Learn more about Planning Maestro’s reporting and analytics capabilities by clicking here.Centage Corporation’s Planning Maestro is a cloud-native planning & analytics platform that delivers year-round financial intelligence. With Planning Maestro, Centage offers the sophisticated features needed by small and mid-market organizations to integrate budgeting, forecasting, and deep data analysis within one easy-to-use, scalable SaaS solution. For more information on how to modernize your office of finance with intelligent planning, view our product demonstration video, or call 800-366-5111.

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